Imposition Of Damages U/s. 14B Of EPF Act Must Be Based On Reasoned Justification And Not Mechanical: Calcutta High Court
Calcutta High Court dismissed a petition filed by the Provident Fund authority and upheld the order of the Central Government Industrial Tribunal, and held an order levying damages for late payment of P.F. contribution cannot be mechanical and it must consider aggravating and mitigating circumstances.
The Calcutta High Court held that the imposition of damages under Section 14B of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF and MP Act), cannot be arbitrary or without proper reasoning. It emphasized that damages under Section 14B must be imposed based on a clear application of mind, taking into account all relevant factors, including whether the delay in deposit was wilful and deliberate.
A Single Bench of Justice Shampa Dutt (Paul) held, “Under the Employees' Provident Fund Act, Section 14B allows the Central Provident Fund Commissioner to recover "damages" from employers who fail to make timely payments of mandatory contributions to the Employees' Provident Fund (EPF), essentially acting as a penalty to incentivize compliance and ensure employees receive their full benefits by punishing employers for delayed payments; this includes contributions to the Pension Fund and Insurance Fund as well.”
The Court added, “…damages as assessed under Section 14B of the EPF Act along with interest is clearly arbitrary and has been passed by the authority (APFC (damage cell)) without proper reasons and was thus not in accordance with law.”
The Petitioner was represented by Advocate Shiv Chandra, while Advocate Arnab Dutt appeared for the Respondents.
Brief Facts
In the present case, the Assistant Provident Fund Commissioner (Damage Cell) (Commissioner), in a proceeding under Section 14B of the EPF & MP Act, directed the employer of M/s Rishra Vani Sharati (concerned establishment) to remit the balance amount of damages and interest within 10 days, failing which action under Sections 8B to 8G of the Act could be initiated. The total dues were assessed at Rs. 9,17,552/-.
An appeal was filed against the said order of the Commissioner by M/S Rishra Vani Sharati Central Government Industrial Tribunal, Kolkata (Tribunal), which, after considering the materials on record, held that a penal provision should be construed strictly, and damages under Section 14B must relate to a 'default' in payment of contribution. In its order, it was further observed by the Tribunal that the establishment enjoyed exemption under Section 17 of the Act of 1952 till April 1, 2011, and penalty would not be levied in all situations of delayed remittance of PF dues. The Tribunal held that damages must be imposed with due consideration of aggravating and mitigating circumstances, and not in a mechanical manner. The Tribunal also noted that damages do not compensate the beneficiaries under the scheme, as interest under Section 7Q already ensured compensation for the delay.
Being aggrieved, Petitioner, challenged the Tribunal's order and has contended that penalties under Section 14B were meant to act as deterrents and that exemption under Section 17 would not preclude liability for damages post-exemption.
Reasoning of the Court
The Court referred to the decision of the Apex Court in Organo Chemicals Industries and Anr. vs Union of India & Ors. (1974), wherein it was held that the mere absence of a provision for an appeal in the EPF and MP Act , does not imply that the Regional Provident Fund Commissioner is vested with arbitrary or uncontrolled power without any guidelines and that the conferral of power to award damages under Section 14B is intended to ensure the success of the measure. It is contingent upon the existence of certain facts, requiring an objective determination rather than a subjective one.
The Bench stated, “Under the Employees' Provident Fund Act, Section 14B allows the Central Provident Fund Commissioner to recover "damages" from employers who fail to make timely payments of mandatory contributions to the Employees' Provident Fund (EPF), essentially acting as a penalty to incentivize compliance and ensure employees receive their full benefits by punishing employers for delayed payments; this includes contributions to the Pension Fund and Insurance Fund as well.”
The Court observed, “The school in this case was an exempted establishment from 01.03.2005 till 31.03.2011. As such imposing damages for the said period is not in accordance with law…. The table shown in respect of the damages and interest assessed is without any calculation. It is a general table showing the due.”
The Court noted that the damages assessed under Section 14B of the EPF Act, along with interest, were arbitrary as the order failed to specify how the delay was assessed.
Consequently, the Court upheld the Tribunal’s Order and dismissed the writ petition.
Cause Title: Central Board of Trustees, through the Regional Provident Fund Commissioner-1 Regional Office Howrah v. Registrar Central Government Industrial Tribunal, Kolkata & Anr. (WPA 1945 of 2025)
